Correlation Between GoldMining and Derwent London
Can any of the company-specific risk be diversified away by investing in both GoldMining and Derwent London at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining GoldMining and Derwent London into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GoldMining and Derwent London PLC, you can compare the effects of market volatilities on GoldMining and Derwent London and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in GoldMining with a short position of Derwent London. Check out your portfolio center. Please also check ongoing floating volatility patterns of GoldMining and Derwent London.
Diversification Opportunities for GoldMining and Derwent London
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GoldMining and Derwent is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding GoldMining and Derwent London PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Derwent London PLC and GoldMining is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on GoldMining are associated (or correlated) with Derwent London. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Derwent London PLC has no effect on the direction of GoldMining i.e., GoldMining and Derwent London go up and down completely randomly.
Pair Corralation between GoldMining and Derwent London
Assuming the 90 days trading horizon GoldMining is expected to generate 1.95 times more return on investment than Derwent London. However, GoldMining is 1.95 times more volatile than Derwent London PLC. It trades about -0.05 of its potential returns per unit of risk. Derwent London PLC is currently generating about -0.09 per unit of risk. If you would invest 123.00 in GoldMining on September 1, 2024 and sell it today you would lose (3.00) from holding GoldMining or give up 2.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 59.09% |
| Values | Daily Returns |
GoldMining vs. Derwent London PLC
Performance |
| Timeline |
| GoldMining |
| Derwent London PLC |
GoldMining and Derwent London Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GoldMining and Derwent London
The main advantage of trading using opposite GoldMining and Derwent London positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GoldMining position performs unexpectedly, Derwent London can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Derwent London will offset losses from the drop in Derwent London's long position.| GoldMining vs. Greenroc Mining PLC | GoldMining vs. Silvercorp Metals | GoldMining vs. Sydbank | GoldMining vs. AMG Advanced Metallurgical |
| Derwent London vs. Hammerson PLC | Derwent London vs. Workspace Group PLC | Derwent London vs. Supermarket Income REIT | Derwent London vs. Diversified Energy |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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